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New Legislation Could Hinder Landlords From Recovering Overdue Rent

12 Jun 2014
New Legislation Could Hinder Landlords From Recovering Overdue Rent

Landlords will no longer be able to simply enter a property without notice and seize goods belonging to a tenant to recover unpaid rent. On 6 April 2014, the old common law remedy of distress was replaced by a new statutory process of Commercial Rent Arrears Recovery (CRAR), which changed the law to provide that landlords can only seize tenants’ assets under specific conditions.

“There will be a number of criteria that have to be met before Commercial Rent Arrears Recovery can take place.” says Sarah Telford, Litigation Solicitor at QualitySolicitors Rubin Lewis O’Brien.”The new rules may make it more difficult for landlords to recover what is owed. Landlords without a written lease or who let mixed use premises will be unable to use the procedure at all.  As a result, tenants may seek to take advantage of this.”

Under the new rules, more than seven days net unpaid rent must be outstanding under a written lease of commercial premises.Rent will no longer include service charges or other sums, even if these are defined as rent under the lease. The landlord must use an enforcement agent to act on their behalf, and the agent must give seven clear days’ notice of their intention to recover the rent using the CRAR process. There are also new rules on the type of goods that can be taken and the value of tools which can be seized. The minimum period between seizure and sale has now been extended from five to seven clear days and seven days’ notice must be given to the debtor of the intention to sell their goods, as well as the date and location of the sale.

Landlords are particularly concerned that the notice period which now must be given to the tenant before the procedure takes effect could give the tenant plenty of time to remove any items of value from the property, thus reducing the effectiveness of the procedure. 

“The fact that service charges and other sums due are specifically excluded as being classed as ‘rent’ may mean that landlords find themselves having to take two different means of recovery in order to obtain payment of the sums due.”continues Ms Telford. “However, the fact that the enforcement process can take place any day of the week and the rules have been loosened in respect of the seizure of ‘tools of the trade’ may have additional benefits for landlords.With the introduction of the new process, it is important to make sure that Landlords understand what they can and cannot do to avoid falling foul of the legislation.

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